HGTV Type Shows: Reality or Just TV?

For years my wife hated it when I would watch "Designed to Sell," "Flip or Flop," "Flip This House," or "Curb Appeal." She said that since we were living it on a daily basis, doing 10-25 home renovations per month that she absolutely didn't want to watch it during prime time television where she could be watching something else. I always came back with the retort that by watching these shows you could get some really good tips that keep you sharp, as long as you can weed through the fabricated tv drama!

Imagine my surprise last night when my wife is watching "Fixer Upper" and tells me I should come watch it with her! Naturally, I sat down and before you knew it we had been through a large bowl of frozen yogurt topped with fresh raspberries and three episodes. My wife loves the interaction between the two stars of the show, likes the setting, and the family values that they have, I think she also loves the transformations of the homes as she sees the before and after pictures. There are some great lessons for beginners on these shows, especially on things like design and interior decorating. You can tell what renovations make the big differences for resale. However, some things in these shows just are plain unrealistic.

Things You Can Learn From HGTV Type Shows:

• You Have to See The Diamond in The Rough: Notice on "Fixer Upper" how they always drive by three houses always trying to keep you on the edge of your chair as the potential home owner agonizes over which of the three choices they will choose. One will invariably be in great shape, a retail ready sale that just is missing the crown molding the buyer so desperately wants. The second will be one that is near retail, but has a few items that need to be done, an outdated kitchen and a lot of wallpaper, and perhaps it's missing a second bathroom that would need to be added. The third house (the one that is always picked) needs a major transformation, it's well below retail value but needs a lot of work. There are great bones and the architecture of the home and historical details will make this house incredible once it's done. You have to find houses that have huge upside and hidden value that others missed.
• You've Got to Buy Right: Now in the episodes I watch the stars always negotiate $10,000-$20,000 off the purchase price, and then explain that by the time they do their renovation the buyer will have $10,000-$20,000 equity. As a flipper or investor that's not generally enough unless you are working in the lowest price points. They do at least pull comps (although they don't show it) and are aware of the cost per square foot that homes in the area are selling for. This is all really good information, however, typically for how rough the homes they are buying are, they don't negotiate low enough. Now they don't need to because they are working with the end buyer, but you do if you want to make a profit.
• There will be Latent Defects: It's always smart to budget for contingencies, and make sure that your project will be profitable even if you hit some snags. You're in the business to make money, not just to have the joy of a hobby restoring grandeur to old houses, so you need to make sure that you will make money even if worst case scenarios take place.
• Differentiate Yourself From Your Competition: There is always a great pergola that the stars surprise the owners with, some great island where they have opened up the tiny kitchen, a corner dining arrangement that is crafted from old wood and is totally decked out. The home is staged with great pieces that add a design element that attracts the eye. The colors that are used really pop, and there is no question that competing homes from other sellers will not be renovated to the same standard. When you are looking to sell you have to have several of these items that make your property stand out, and these shows do a great job of helping you know how to do that!

The Mistakes That Are Glaring:

• The Drama Doesn't Have to Exist: While it's crafted for television and needs some drama and suspense to keep the viewer interested, most of the drama in these shows is staged. It makes for great television, but it's terrible if you are an investor, so avoid it! During the three episodes I saw last night there were: Old knob and tube wiring that required $5,000 in unexpected total electrical re-wire, Ivy that had totally eaten the house and required $6,000 in new siding that was "totally unforeseen," a foundation problem that was going to eat $3,500 of the budget, and mold on the walls that would require new sheetrock for $4,000. In every one of these instances a good home inspection and walk through from an experienced general contractor would have caught these problems. Doing that would have given a huge negotiation chip to the buyer, and it would have been budgeted for so that there weren't these "surprises." Make sure that you get a thorough inspection, consider having the county or city building inspector look at the project (that may not cost you anything) and certainly get a general contractor, electrician, plumber and hvac vendor out to the property.
• "This Block Is Just Waiting For Someone To Take The 1st Step": Last night the stars showed a great house, that had tons of potential, but the surrounding houses were almost all in bad condition. They made the comment that this block had so much potential and that the beautiful, historically significant homes on the block were just waiting for someone to "take the first step" in improving the street. As an investor you want the smallest house in a neighborhood of bigger homes. You want the ugly house that is dilapidated but is surrounded by fantastically renovated homes. The last thing you want to do is go into a neighborhood where nothing has been improved and you are going to be the pioneer. Pioneers get the arrows! Unless there is critical mass showing that the area is transitioning, it's dangerous to be the first one (unless you control half the block and can create the critical mass) because the improvement may never gain traction. There may be bad crime elements that can't be immediately eradicated, perhaps the area is stigmatized such that home owners won't buy there yet, or maybe the economy will take a dip and renovation will come to a standstill?

I enjoy the entertainment of the dramatic situation of these shows, they provide great lessons of what not to do, and help beginning investors to avoid dangerous situations. There are fantastic design ideas, ways to help a property eliminate structural obsolescence and improving floor plans, you can learn a lot from the color schemes and see what improvements really wow the new owners. Even as a pro myself I get a few good refreshers as I watch some of these shows. They can give you some ideas of things to do, and of what not to do.  In the end, sometimes it's reality and sometimes it's just t.v.

What have you learned watching these types of shows?